Dealing with late payments is an unfortunate reality for many self-employed professionals. Even if you have clear contracts and payment terms in place, some clients still drag their feet when it comes to settling invoices.
This causes major cash flow issues that can seriously impact your business’s day-to-day operations. However, confronting the problem head on is essential to get paid and avoid tension with customers.
Here are Professional Saver’s top tips for professionally and firmly managing late B2B payments:
Be Proactive With Payment Terms
Clearly outline all payment deadlines within your standard contract or service agreement. For extra clarity, include the exact due date on every invoice too.
Aim for 7, 14 or 30 days from the invoice date if possible. Quick payment targets focus clients and reduce administrative excuses for delays.
Send Friendly Payment Reminders
If an invoice becomes 5-7 days overdue, send an initial friendly reminder. Keep this concise, polite and to-the-point.
Remind them of the overdue amount and ask them to settle ASAP or contact you immediately to discuss it. Offer to send a duplicate invoice if they can’t locate the original.
Add Late Fees
To encourage timely payment, consider adding late fees that accumulate daily or weekly from the due date. Make clients aware of these possible added charges upfront.
Late fees typically range from 1-3% of the invoice value. This covers your added costs and administration time chasing payments.
Try Different Contact Methods
If friendly reminders are ignored after 7-14 days, try phoning the accounts payable department directly if possible. Emails are easier to overlook so speak to someone handling payments.
Explain you are calling about an urgent overdue payment and establish reasons for the delay. See if they need any extra information from you to release funds.
Offer Payment Plans
Some clients may be experiencing temporary cash flow problems of their own. Offer to split invoices into smaller instalments over 2-3 months to ease pressure and ensure you still get paid.
Draw up a clear payment schedule with dates and amounts for their records. Avoid open-ended arrangements.
Hire a Collections Agency
For invoices 60+ days late with no response, consider enlisting a professional debt collection agency. Many will pursue payments on your behalf for a small percentage of the recovered sum.
Let non-paying clients know you plan to get an agency involved. This can motivate some organisations to promptly settle up.
Take Legal Action
If friendly reminders, late fees, payment plans and collection agencies all fail, small claims court action may be your last resort.
This allows you to legally recover sums owed plus interest and incurred costs. While the process takes time, determined late payers often settle quickly once court papers are formally served to avoid judgement.
How Insurance May Be Able To Help
As a self-employed professional, having the right insurance in place can provide vital financial protection if you experience issues with late-paying or non-paying clients.
Key covers to consider include:
Professional Indemnity Insurance – This protects against claims of poor advice, negligent work or financial loss that clients accuse you of causing. It covers any compensation and legal costs so you can defend yourself. Useful if late payment stems from dissatisfaction with your services.
Public Liability Insurance – Covers legal costs and damages if a client’s property is accidentally damaged by you and they pursue compensation.
Legal Expenses Insurance – Provides funding for legal advice and representation if you need to take court action against non-paying customers.
Bad Debt Insurance – Specialist policies that cover outstanding invoice values if clients go bankrupt or refuse to pay without justification. These pay to write off the sums owed.
Speaking to an insurance provider like Professional Saver can give you expert advice on protection for issues caused by late-paying B2B customers. This additional financial security lets you focus on resolving such payment problems firmly and professionally using the steps outlined above.
Dealing with late invoices tests the patience of all self-employed professionals at some point. Don’t allow clients to continually stretch your goodwill and cash flow. Follow the above steps to claim the payments you deserve in a professional manner.
